The Ultimate Guide to Setting up a PMO

The more projects your organization is running, the more you need mechanisms that ensure projects don’t fail.

That’s because failures can become very costly for an organization.

Setting up a Project Management Office or PMO is a common way how organizations control and oversee their projects.

What a PMO really is

Put simply, a PMO is just another department like finance or HR. Its responsibility to set standards for how projects are managed and to monitor their progress.

Standards can include mandatory project management templates but also rules on how projects must be carried out. For example what lines of approval must be followed, which project stakeholders should be included and other rules.

Project managers often complain about the admin work they have to do in order to fulfil PMO requirements. Filling out checklists or working with complicated Word templates can be quite frustrating and time-consuming. This is something I can definitely confirm.

Also, PMOs often have dedicated staff for collecting the project status data and creating progress reports for management.

Responsibilities of a PMO:

  • Define standards and rules for project management
  • Monitor and approve projects
  • Improve the success rate of projects
  • Provide training around project management methodologies and standards
  • Create relevant documentation and templates

Why should you have a PMO?

When you plan to set up a PMO your first question should be: What’s my goal? What do I want to improve or implement by creating a PMO?

There are different reason for having a PMO:

  • Improve overall project success rate. If many of the projects in your company fail, exceed their budget or get delayed, then that’s a good reason for having a PMO.
  • Set common standards. If every department has their own set of templates and follows their own project methodology, this can make it hard for cross-functional projects to succeed. A PMO can define common standards that departments have to follow.
  • Ensure compliance with business strategy. The reason why companies run projects is because they need to innovate. They must constantly create new products or services so they won’t end up as the next Kodak. Once you understand this, you understand why having projects succeed is so important. A PMO can act as a watchdog for ensuring projects actually deliver business value.

Setting up a PMO

Before we dive into how you get a PMO actually set up, I want you to understand that it’s going to be a long process – and for sure not an easy one. You’ll have to get the buy-in from people and overcome a great deal of resistance. Plan for a year to get the PMO up and running.

Steps for establishing a PMO:

  • Step 1: Define a goal
  • Step 2: Hire a team
  • Step 3: Define metrics, project execution rules and standards
  • Step 4: Train your organization

Step 1: Defining a goal

First, clarify what purpose your PMO is supposed to fulfil. You can find a number of reasons above. Why should you care about a goal? The goal will influence the later shape of your PMO: what parts have to be regulated with standards, what templates are required, what key figures should be measured and so on.

Step 2: Hire a team

You don’t need a big team to get stsarted. An experienced project manager can set up the entire PMO for you. Only when the PMO assumes its routine work (managing projects, reviewing project proposals, training first-time PMs) will you actually need a larger team. But then you really need more people, otherwise a PMO can quickly become the bottleneck.

PMO of larger organizations are usually staffed like this:

  • PMO director
  • project and program managers (*)
  • project controllers
  • other project support roles like administrative assistants

The PMO Director heads the department. (*) Project and program managers usually don’t belong to the PMO but are part of the functional organization. Project controllers gather progress and cost data from projects and assemble reports.

Read more on PMO staffing here.

Step 3: Define metrics, project execution rules and standards

Now let’s get to the formal side of establishing a PMO.

The first step is to define suitable metrics to classify projects. Metrics allow us to quickly allocate projects into distinct categories, which in turn makes it easier to set specific rules for each project category.

Common project metrics:

  • project budget size
  • impact factor
  • strategic relevance
  • project duration
  • risk factor

The most simple metric would be project budget size. It goes without saying that a project with a $5 million budget should be handled and monitored more strictly than a $200K project. A million dollar project may have to be reviewed and approved by the board, whereas a $200K project could be signed off on business unit level.

Another metric I find very useful is project impact or complexity. Some projects affect only one area, such as finance. Other projects have an impact on a range of processes like sales, marketing, finance and logistics.  The greater the impact of a project on the organization, the greater the damage a failed project can cause. That’s why complex projects must follow stricter rules than projects that affect only one area.

Finding the right metrics for your organization is very important, so make sure you spend some time on that topic.

When it comes to defining rules for project execution, make sure to document those in an easy to understand format. This could be a simple Powerpoint titled ‘How we run projects at <company>’ which is shared with the project management staff in your organization.

Rules for project execution should cover:

I wouldn’t recommend writing your project standards manual from scratch. Thousands of other companies have done it before you. Ask another company if they would be willing to share their strategy with you. They can remove any part in the document that contains confidential information and pass the document on to you.

Step 4: Train your organization

Once you have set the ground rules for project management in your organization, it’s time to get everybody on the same page. Make a list of all stakeholders and people you’ll have to train for the new process. This can become a huge endeavour, so if you have somebody who can take over part of the training, that’s good.

Training should include:

  • directors and team managers
  • program and project managers
  • process owners and managers
  • project administrative staff

My question to you

What has been your experience around establishing a project management office? What has worked well for you and what did you struggle with? I am curious to know. Leave your response in the comments below!

Best,

Adrian Neumeyer

Hi! I'm Adrian, founder of Tactical Project Manager. I created the site to help you bring your projects to success. In the past I've worked as an IT project manager for 10 years.

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